Ted Frank at Overlawyered, has long been a strenuous advocate for arbitration. He’s right, of course. Conceptually, arbitration offers an expeditious and cost-effective method of resolving disputes. This is a good thing, right? Well, not exactly. As Ted notes, opponents of mandatory arbitration claim that it denies people their “day in court.” Well there’s a loss.
For the vast majority of ordinary disputes, the court system is a nightmare, taking forever and burdening everyone with expense the often dwarfs the amount in dispute. The need for a better way to address disputes has long been clear. So why, then, has arbitration become a dirty word? Ted writes:
Unfortunately, there are thirteen separate bills before Congress proposing to abolish a consumer’s right to pre-commit to arbitration and extract the resulting savings from the businesses with which they contract. As a coalition of business groups note :
If successful, these legislative efforts would retroactively declare unenforceable potentially millions of provisions for the orderly and economical resolution of disputes. Opponents of pre-dispute arbitration have neglected to realize that, if enacted, these provisions will actually limit the realistic opportunity for an average consumer, employee, and investor to obtain a remedy if a dispute arises.
Note the proponent, the United States Chamber of Commerce. This is where things turn ugly, where consumers have tarred the very concept of arbitration as a business trap to deny them a fair hearing. In short, the harder business interests try to persuade regular people that arbitration is good, the harder consumers fight arbitration.
The problem is not arbitration. The problem is captive arbitration. Essentially, people believe that businesses that employ mandatory binding arbitration in their contracts “own” the process. The arbitrators are in their pocket. The private businesses operating arbitration need to maintain their loving relationship with business to keep those fees rolling in. After all, it’s the businesses that feed their coffers, not individual consumers. Please the business and the arbitration enterprise enjoys revenues. Anger them and arbitrators will be out on the street looking for random disputes to resolve.
There are studies that suggest that consumers fare poorly with the major arbitration services, the ones most likely to be used by big business. These studies are disputes, and may not in fact reflect any bias, but rather that businesses aren’t wrong nearly as much as consumers. Or, they side with their patrons.
Arbitration is an industry, like many others. There are large enterprises engaged in it, and individual arbitrators who handle cases. No doubt some are better than others. Perhaps some pretend to be neutral, but really serve their masters. If so, then it isn’t arbitration.
If the arbitration industry doesn’t change the perception that it exists for the benefit of business, and that consumers won’t get a fair shot, it will be a terrible loss. The fault isn’t with the concept of arbitration, but the perception and, if true, reality, that arbitration is bought and owned by business.
But this perception is not going to change based upon the continued assertion of support by business interests, the very entities that give rise to the mistrust of arbitration, or the collateral attacks on lawyers as the self-serving opponents of arbitration. Refusal of the business proponents of arbitration to recognize that their advocacy does more harm than good continues to drag the concept of arbitration into the gutter. People don’t trust business, and they don’t trust a dispute mechanism that business favors.
Moreover, the compulsion to slam trial lawyers at any opportunity does no service to the cause of arbitration. Even if we were to assume that it’s the evil trial lawyers, a fundamental tenet of Overlawyered, that have malevolently smeared to good, kind, benevolent business interests of America, it does nothing to instill faith in the neutrality of arbitration. Ordinary people must believe that they will receive a fair shake in arbitration. They don’t. Slamming trial lawyers does nothing to change this.
As a long-time advocate of alternate dispute resolution, it pains me to see this concept dragged into the mud by allowing itself to be perceived as the captive of business. It not only has to be fair and impartial in fact, but maintain the perception of scrupulous integrity to gain the acceptance of the public.
And believe me, a “day in court” isn’t all it’s cracked up to be.
Update: I forgot to mention this, which isn’t going to help the image of arbitration any. From the WSJ Law Blog,
In its cover story this week, BusinessWeek offers up a lengthy critique of the National Arbitration Forum, one of the nation’s largest arbitration firms. The story focuses on credit-card collection arbitrations, citing internal NAF documents, case results, and interviews with NAF arbitrators for the proposition that NAF “operates a system in which it is exceedingly difficult for individuals to prevail.”
This is going to be a really tough one to blame on the trial lawyers. Maybe they seized control of Business Week in the middle of the night?
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There’s a great article by Doug Van Epps about “your day in court.” His premise is that people think their day will be far more meaningful than it actually is!
If I can find the link I’ll post it here and on c-o-r.
Thanks Anne. I bet that anyone who’s had the pleasure already knows that court isn’t nearly as much fun as it seems.
“There are studies that suggest that consumers fare poorly with the major arbitration services”
There are no studies that show consumers fare poorly with arbitration services relative to how they fare in court.
It’s statements like yours that create the unfair perception of arbitration, as there is no evidence that arbitration is “bought and owned by business.”
What’s needed is for the consumer advocacy groups to act like consumer advocacy groups, rather than trial-lawyer advocacy groups, and point out that these are bills that hurt consumers.
Wrongo. The Public Citizen study called The Aribtration Trap clearly concludes that consumers fare poorly, and you know about this Study, Ted. Denials don’t make the studies go away.
Defensive and argumentative comments are why arbitration has been branded as the captive of business. Why not try to advocate the positives of arbitration rather than harping on evil trial lawyers. You got to stop looking for external blame for internal failures.
I posted at overlawyered and I put up my own post on this topic with my own thoughts on the matter. I, too, agree arbitration is a good thing, generally. I just would like the process to be voluntary and I would also like it if arbitrators were basically part of the judicial branch – or otherwise were a neutral government entity, selected by voters or appointment rather than just hired by big business. I think people would trust the process more if they knew that arbitrators’ paychecks were not being paid for by big business and if arbitrators were answerable generably to the electorate like judges are.
I understand why you would feel more comfortable if arbs were answerable to someone, but if they become a part of the normal judicial process, the likelihood is strong that it will come to resemble court far too closely and lose the very elements that make it worthwhile, speed and expense. In fact, I still find most of the major arbitration services to be too slow and awkward.
But the pro-business contingent simply refuses to accept the idea that the public mistrusts arbitration because of business. They prefer to blame their perpetual nemesis, trial lawyers, or just tell the public how stupid it is and how smart they are. What’s lost here is that the public, unlike some ultra-pro-business bloggers, are not prepared to accept corporate America as their savior and protector. So they just keep pounding away at it, thinking that eventually the vast majority of America will eventually “get it.
Show me where the Public Citizen study has statistics showing consumers do better in court than in arbitration for similar cases. It never makes that claim.
As any regular reader of Overlawyered knows, the Public”>http://overlawyered.com/tag/arbitration+public-citizen/”>Public Citizen study (1) is highly misleading and (2) does not “show consumers fare poorly with arbitration services relative to how they fare in court” since it does not make that comparison at all, but simply bad-mouths arbitration.
The Public Citizen study was not a study, but an advocacy piece. Which is fine, but then they should stop calling themselves a consumer advocacy group when they’re advocating against consumers.
Again, there’s no evidence that arbitration is “bought and owned by business.” How else to defeat that minority perception except to point out that the people making the accusation aren’t telling the truth?
Kinda scary that when I post something which largely agrees with you position, Ted, you will still argue about any and every thread you can possible pull from the fabric of the post, no matter how tangential to the point or how tenuous your grasp of the thread.
Since the Public Citizen study (which didn’t exist in your last post) now exists, you dismiss it as an advocacy piece since it doesn’t agree with you. By your definition, there can be no study that doesn’t agree with you, reducing any further discussion pointless.
Thus, under Ted’s rules of engagement, Ted wins. Unfortunately, you still remain unpersuasive to anyone not already part of the choice. Notably, even Overlawyered fans, the ones who inherently hate trial lawyers, also reject arbitration. It’s a conundrum.
I can understand fearing that it will just turn into another trial court – but there is no reason that this HAS to happen – there already is an established arbitration process out there – multiple process, actually. If you codify those, you can keep all the procedural stuff intact and just change who employs the arbitrators.
If you just make clear from the start that, while paid for with government money, it is NOT court, I don’t see why there would be a problem.
Scott, my statement was “There are no studies that show consumers fare poorly with arbitration services relative to how they fare in court.”
The Public Citizen study attacks arbitration, but does so by ignoring that arbitration consumers actually perform better than they do in court. It omits the comparison. My statement, with its qualifier, was 100% accurate. At no point did I claim the PC study did not exist. Please stop misrepresenting me.
Why do you think a Business Week reporter is above being spoon-fed a misleading story by trial lawyers?
Ted, I apologize profusely. I have significantly underestimated your ability to attribute malevolence to trial lawyers, despite the absence of any basis whatsoever. In the world of bald accusations, you are indeed a star.
Scott, you’re not that naive. How do you think Business Week got “internal documents” while simultaneously quoting lawyers suing NAF? Or are you claiming that journalists never use plaintiffs-bar-planted stories?
Ted, I believe that you’re the person making unfounded claims that the Biz Week story is a plant by trial lawyers. I take no position, but until you have some evidence (other than the certainty of your convictions), you’re sucking wind on this one.
I fought an arbitration claim on my own.
It took 9 months, but could have been resolved by 1 day in court.
9 months of agony and stress and time spent after work reading the Code over and over again and writing and faxing documents. I do not have any legal training or education except for 1 business law class 15 years ago. Just a working stiff trying to protect my own rights and couldn’t afford an attorney. This is my opinion and experience and I am not a professional anything.
If anyone has tried to interpret the gibberish and mixed up Code of Procedures of the NAF you would understand why Arbitration awards are given out like candy at the Forum.
I spent 9 months, yes 9 months to fight an Arbitration claim I objected too. The collector was putting information in my file and not sending it to me which I discovered when I requested a copy of my file which became a monthly tradition.
And then you’re dealing with Case Coordinators who mis-apply the rules and don’t even understand them themselves.
The collector did not provide discovery.
The Arbitrator then requested they provide discovery documents, they didn’t and then they got an extension. All the time I’m objecting and requesting dismissal because of this and other reasons. Then I requested 14 days under the US Code Collection to review any info they might provide and the Coordinator did not know how to deal with it. She gave me a 30 day extension which in turn would give the collector another 30 days. I objected and told her I did not request an extension, just the time allotted by Federal law to review the discovery documents. So I had to object to the extension, and they reversed it.
The Code of Procedure doesn’t work with the Federal Laws. And Violations of the FDCPA mean nothing in Arbitration. Finally after over 200 pages of documented objections and repeated requests for the Arbitrator to apply the Rules of the Code to the Collector too, 3 Assignee name changes by the Collector’s attorney, a third party violation, and over 9 months of Objection to the Arbitration and the failure of the Collector to provide discovery I prevailed.
One day in court would have solved it because they waited over 90- days between the time they filed and served which a violation of the Code of Procedure, but you have to respond to object to the claim being Arbitrated and state that rule in the objection.
Simple as that. It could have been 1 court date vs 9 months at the NAF house of terror.
If you want to hear how consumers “fare” with arbitration, you should read my post . I would have preferred a day in court with a “Fair-minded” judge compared with 9 months of fear based on the 95% rate of arbitration awards against consumers.
I am President of a grass roots non profit advocacy group that strongly opposes predispute binding mandatory arbitration. For Ted to pretend that all consumer groups are contected to trail lawyer advocacy groups is ludicrous.
Hidden in fine print, binding arbitration clauses hurt consumers and allow business more and more to cut corners and harm the consumer. They can do it because they KNOW they can get by with it. Arbitration is NOT CHEAPER, FASTER and certainly NOT FAIR when a consumer is forced into it and it is administered by the arbitration company chosen by the business. I am SICK of hearing about the evil trial lawyers. Thank God for them. They have helped to expose some horrible business practices that killed many — in the past of course. Now all bad business preactices are hidden in secret arbitration.
One day I hope to hear that Ted himself has been forced to arbitration. His tune will certainly change then. No one is immune.
Ted has an agenda, and we all know that Ted will push it to the death. Thanks for your comment.
I had a construction defect case a few years ago with a home builder and home warranty co. I didn’t sign an arbitration clause with the builder. But, the builder bought a warranty on his houses and the policy arrived after closing with an arbitration clause in it. The builder refused to make repairs to the defects which every side’s experts found were going to cost at least $60,000. The warranty co’s experts agreed that the defects were the builder’s fault, too. But they denied the claim. Part of their denial was under the many exclusions of the policy’s coverage, and part was just denied because they could. Their terms called for mandatory arbitration w/ CAS the arbitration firm owned in part at that time by a disbarred attorney. Their terms also forbade us from suing the builder so that we could not pursue him, they said, for the damages NOT covered by the warranty language.
Luckily for us, I found out in time how biased this arbitration was likely to be, and that because we had a govt insured loan, we didn’t have to arbitrate. (24 CFR 203.204(g)) It took us years of battling to settle but we did, and only because we could not be forced into arbitration. We retained our right to sue, which was vital leverage even though we settled before trial. We were pro se by then, too. Retaining our right to sue was cheaper and more fair. It would have been faster, too, had we not retained a very bad lawyer at one point, (who has since been suspended, apparently in part due to our complaint to the bar).
I feel certain that had we gone to arbitration, based on early “offers,” we’d have been lucky to come away with half our damages, and possibly NOTHING. Besides the repair estimates of that time, there were other damages such as alternative living costs, loss of value of the house, legal fees, experts fees, etc. We’d have been forced into bankruptcy and probably had to walk away from the house/mortgage too. Instead, by keeping our right to sue and avoiding a rigged and secretive arbitration process, we recovered our damages and moved on with our lives. We didn’t profit and never expected to, and we never set out to sue anyone. The other parties didn’t keep their end of the bargain and we exercised our legal rights to force them to compensate us for our losses. That right is taken away by pre-dispute arbitration clauses. Ted’s arguments fall apart in the face of rebuttals here and elsewhere, and they ring hollow to me because I’ve seen for myself that being ABLE to sue is a right that’s critical to retain. That doesn’t make one “litigious” nor does it make any lawyer who helps consumers a bad guy. IMO the corporate defense lawyers are more likely to wear the black hat. It’s funny that people like Ted disparrage “trial lawyers” but forget about corporate defense lawyers.
I live in a house that is defective and have been fighting the builder for almost two years. Unfortunately in my sales contract there is a binding arbitration clause that also states in capital letters that the builder gets to pick the arbitration company. After looking into this process, I have found that I cannot conduct any research on how many times the arbitrating company ruled in favor of the builder because the records are sealed. I also found out that I have to give the company my credit card number so they can charge my account whenever they see fit. Arbitration is far more expensive in that they can charge whatever fees they deem appropriate whereas the court system has a set fee schedule. In addition, I would have to pay each person that is overseeing my arbitration, and all of the costs associated (travel, room, court reporter, etc.) The builder because of their close association with the arbitration company will usually prevail. I am a one time deal with the company, the builder gives them continual business, so it makes sense which side they take. Also, the binding arbitration decision is binding only for the person, not the builder. They can appeal, which they do. Which makes the term binding a misnomer. In addition once this is said and done, the person cannot file in court. It is said and done. Even if by some chance the individual wins, the builder will appeal and drag it out for years to come. There have been some instances where the person won and never collected any monies. Arbitration clauses were meant for big business against big business, not individuals. Retired judges, lawyers and barred lawyers have found a gold mine in forming and/or working for arbitration companies.
Hopefully the bill that appeals binding arbitration will pass. Most will not understand the importance of this ban until they have to face it themselves.
Since the Public Citizen study (which didn’t exist in your last post) now exists, you dismiss it as an advocacy piece since it doesn’t agree with you. By your definition, there can be no study that doesn’t agree with you, reducing any further discussion pointless.
There is nothing in the least bit close to “fair” in this process. After writing a letter to our builder that we would no longer be pursuing our warranty requests, and by doing so, would be accepting the financial loss ourselves, our builder filed for binding arbitration.
The arbitrator selected had worked in previous firms with the builder’s attorney and was presently attending educational classes with him.
The arbitrating firm did not require the builder to follow the terms of our contract prior to filing.
Arbitration filed contained civil rights freedom of speech issue which is not part of our contract and yet the arbitrating firm accepted it! The builder was using the system to try and silence us.
I feel the citizens have had the judicial system hijacked by corporate America. This is process is a disgrace to America and must be changed!